Back in March I met with a financial planner and found the entire experience a little underwhelming. I thought I’d be meeting with a professional, someone who could give me some good solid advice for the way forward, but I got little more than a few pitches for insurance and some high cost mutual funds I wouldn’t touch with a ten foot pole. That post garnered twenty-seven posts with people chipping in on their experiences and I was curious if there was something more to financial planning than selling insurance and mutual funds?

Was I talking to the wrong type of financial planner? There are so many certifications for people in the financial world that it’s hard to keep them straight. I knew about Certified Financial Planners but there are Chartered Financial Consultants, Chartered Investment Counselors, Certified Public Accountants and Personal Financial Specialists. Each one focuses on a different niche in the personal finance world and I start to wonder if I talked to the wrong person… or did I?

What’s your take on financial planners? Any advice on what I should do?

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20 Responses to “Your Take: Certified Financial Planners”

I am a college student, but have had a few internships with various financial advising/ investment consulting firms. From these internships, and other networking I have done, I have found that people with the certification of
(CIMA) Certified Investment Management Analyst seem the most adept to their client’s needs. Below is s short summary of what the certification entails.

The CIMA credential is awarded by the Investment Management Consultants Association to professionals who pass a pre-qualifying and a certifying exam, complete coursework at the Wharton School, University of Pennsylvania, have a minimum of three years experience in investment consulting and fulfill continuing education requirements.

There are far fewer CIMA’s out there than CFP’s, one can graduate from a university with a complete/near complete CFP certification, not so with the CIMA.

You have to realize that the vast majority of financial planners/advisors/etc. that service the mass market are more or less financial salesmen. I know, I used to be one. The reason is that when you’re dealing with the typical middle-class client, there is very little money to be made.

These types of people more or less invest in their 401k if they do any investing at all, so the advisor can’t make any money on that. Since these clients are coming in with 100k in cash and looking for something to do with it, their advice is going to be limited. They will talk about how to invest more money (through them) in an IRA or brokerage account, and probably how to insure themselves, since most people are underinsured.

It’s not that all of these advisors are pushing bad advice, but they just stand to make very little money on these types of clients, so the best they can do is try to get people to open up a new investment account, or invest more money. They don’t get paid to manage their assets or develop complex portfolios. They don’t get paid to help someone with no assets get out of debt or refinance their mortgage.

To get the more advanced planning and advice that you’re probably looking for, you’re going to to need to find more of a wealth or asset manager, or a fee based planner to receive anything other than a pitch to invest money with them.

Plus, it helps to be a high net worth client as well. In many cases, some really good planners won’t even service you unless you have assets upwards of $500,000 to a million or more. That doesn’t mean you can’t find help without those numbers, but they will be harder to find.

Find a FEE-ONLY financial planner (a decent source is fpanet.org). The designation CFP doesn’t mean much anymore because all the vultures (sales/comission oriented financial un-ethical wanna-be professionals) are getting this designation and giving it a bad rap. A fee-only financial planner is like a lawyer, you get charged an hourly fee to see them and they help you. They do not make recommendations in which they will receive commissions (like the one you recently saw did).

I think the key you need to look at isn’t they’re particular certification. I’d pay more attention to the type of service they are (how are they compensated). There’s Fee-only, and then everyone else. Fee only advisers are only compensated by you. They are more expensive, but you don’t have to worry about the products they push not being right for you. Other advisers receive some of their compensation from the providers of the products you purchase. It sounds to me like you didn’t see a fee only adviser, as they were pushing some insurance and high priced mutual funds (note – you may need insurance and a fee only adviser may still recommend this).

Also, if memory serves me correctly, you are in the baltimore area. I saw an adviser I liked up there that wasn’t about pushing the high cost funds etc, and depending on where in the area you are, he might be a viable option for you. If you’re interested let me know, and I can send you his info.

Jim – you know more than 99% of the financial planners out there. That’s not to say they’re worthless, because they might provide you with insight into your finances that you hadn’t had before. You and most of the people who read your blog probably aren’t going to get much value from a financial planner.

Fee-only planners can be great for somebody who doesn’t have a clue and will not do any independent research on the subject.

I agree with a couple of the comments provided above… you need to find a fee-only planner. In full disclosure, I work for the Garrett Planning Network, but just wanted to throw in my two cents, for what it’s worth.

I think fee-only is the most objective way to be paid for providing financial advice, because the only compensation received is directly from the client.

There are great fee-based and commission-only planners out there as well, but just be sure to ask them 1.) how they get paid and 2.) how much they get paid as a result of the recommendations they are making to you.

Also, I agree that the CFP designtation is not the be-all, end-all designation, but it’s the most widely respected designation in the industry and one of the few that denotes a certain level of competence in all areas of personal finance.

I am a Financial Adviser and I understand your frustration. A true Financial Adviser is not a salesman. Investing is the easy part. The value of a Financial adviser is that they work to make sure that everything from your legal documents, taxes, retirement plans, personal savings, debts and insurance are all working together to one uniform end. Yes the investing pay the bills but it is all the other services offered which could make working with an adviser a good idea.

I agree with Jay above. unfortunately, most of the people who truly need the “advisor” piece can’t afford to pay enough for it to make a living for the advisor. this forces those providers to generate income in other ways, e.g. commissions.

I agree with all the comments above. I’ve been taking CFP classes for fun, and potentially a second career in another life. I think you probably know a hell of alot more than most financial planners out there. You’re probably too young to need the planning services (estates and wealth transfer) that many planners provide and too “poor” (not that I know how much you’re worth) to really access the high end financial advisors that cater to the uber rich for less conventional investments.

I certainly agree with most of the other comments. I have been looking for a way to find a “good” fee only Financial Planner for quite a while. There are a number of resources that will list out advisers in your area BUT how do you find the right one?? You have to approach the whole subject with a great deal of doubt/cynicism. I thoroughly understand the services that CFPs can provide and they are valuable. However, it keeps coming back to finding the right one BEFORE making any commitments. There is an excellent book on this subject, “No Nonsense Finance” by Errold F. Moody.

I saw a comment on Long Term Disability (LTD) insurance. LTD is probably the most important insurance you can have. Unless you are independently wealthy, it is the only way you will survive a long disability at a reasonable standard of living. Take a look at the likelihood of becoming disabled.
There are three important points about LTD
1. The rehab services that are provided at no cost are almost as important as the money.
2. Get it through your employer!!! The group rate is a small fraction of the independent cost.
3. This is probably MOST critical. Make sure, one way or another, that YOU pay the premium. If the employer pays the premium, any benefit you receive is TAXABLE at ordinary rates.
But whatever you do, get LTD.

1. Top of the line: A man I met while serving on the board of directors of a local cultural organization. The organization depended on the proceeds from a large endowment, and this guy was in charge of the money. During a serious economic slowdown when the market tanked and everybody in sight lost money, the organization not only did not lose, it actually gained on its investments. My husband and I hired him to manage the (now ex-)husband’s retirement portfolio. When I left the marriage, half the portfolio and the financial adviser came with me. My cash and investment holdings are now worth five times what they were when I started my solitary journey in life. This advisor gets a percentage of the take, and he is so worth it.

2. OK, warm and fuzzy, but not much better than I could’ve done myself: An old friend who went back to graduate school for an MBA and CFP. She works for a prestigious firm, wears the equivalent of my entire net worth to the office, and appears to be importantly busy all the time. Her free advice was pretty half-baked. She told me nothing I didn’t already know, and she had me put forty grand into American Funds, a mediocre performer.

3. Crooked as a hound’s hind leg: A guy with CFP after his name who was selling MSA health insurance, for which I happened to be in the market. He volunteered to do the same thing (2) did, one of those free surveys of my assets and liabilities, and then tried to persuade me to take $300,000 out of the stock market and put it in annuities. Moving on….

Looks like the profession (as it were) is pretty spotty. It does make sense that if you’re paying someone to help grow your investments, it’s in his or her interest to give you good guidance.

LOL, you got pitches for insurance…..got any? need some?? You really need to cover the three things you can least afford to lose. You health, your income and your life. Dont have these three covered why worry about anything else like retirement, or the next hot stock tip from your know it all friend who is on the “inside”. Won’t matter will it? One car accident away from spending it ALL!

I know, it won’t happen to you. Never happens to anybody, bad things that is.

1. Keep your self out of brankrupcy court…see above and add 1 million umbrella liability policy.
2. Get a living will yesterday.

Cover these things first, and then we can talk about the UNIMPORTANT stuff like investments and how I get paid.

Jim, I read your earlier post about meeting with the financial planner, and I hope you seriously reconsidered getting disability insurance coverage, even if it’s through your employer (which will usually be pretty cheap, I pay around $20 for STD and $15 for LTD per paycheck). I just blogged about this topic, and a young person’s biggest asset is usually their ability to work, so why wouldn’t you want to protect that?

As I mentioned on my blog, I know of a promising young coworker who slammed his new motorcycle into a utility pole on his 21st birthday, and had one limb amputated and another one paralyzed, keeping him from doing his desk job in front of a computer. He also didn’t think he needed disability insurance at his age, but the medical bills combined with the permanent loss of income pretty much meant the end of his financial dreams. The saddest part, which I didn’t mention in my blog, is that taking care of him was such a huge burden for his parents that his mom died of stress related heart failure within a year after the accident. The last I heard, he was living at home with his dad, who works full time to pay the bills in addition to taking care of him as best as he can. Retirement is no longer an option for him, unfortunately.

You can become disabled at any time, even if you have a safe desk job. Do you participate in sports on the weekends? Are there crazy drivers in your area? I don’t believe in spending money on unnecessary things, but I feel disability insurance is a cheap expense that I would not risk going without, as long as I rely on my income from work.

I personally use a commission-based financial advisor and have been very happy with him over the past few years.

One caveat with this type of advisor. You need to have a higher level of trust with this type of advisor since there can still be the possibility of poor advice (because they get paid a percentage of the money they specifically manage for you an unethical advisor might be tempted to sway you away from potentially good investments such as upping your 401K withholding or buying an investment property.)

On the plus side, (at least in my case) I don’t pay *any* additional fees and since my advisor gets paid more money for making my investment sum grow, I feel there’s more of an incentive than a purely flat-rate advisor.

There are fee only advisors (a percentage of your portfolio) and then there are FEE only advisors. I did an initial consulation with one that charges by the hour only. It is up to do to put the “plan” into place.

We decided not to use him because I felt I was at a level and had the resources to do it myself. I read about finanical planning everyday and I have a CPA for the taxes. I think I have enough interest and savyiness (is that a word) to do it on our own.

I’m with azphx1972, you should rethink disability. Shop around for yourself, and you can usually lock in a great plan for a good price for the rest of your life. Disability is life insurance for yourself basically. I really wish I did sooner in life. I’ve got a pinched nerve in my back which because I got disability after it happened it wont cover (preexisting conditions), and while i don’t think this is something that’s going to prevent me from working, it could.

Go apply at any Ameriprise Financial branch. They constantly hold group hiring seminars, and if you can pass a basic aptitude test and have any sort of ability to speak on the phone, you’ll be hired and they will pay/reimburse you to take and pass the Series 7 and Series 66.

Then you can make even less than minimum wage since you end up working 70+ hours a week and end up owing them money. But, at least you have the required licenses to then try and find work at a reputable firm.

I am a fee-only financial planner so take my comments with a grain of salt if you wish. I believe you don’t need a financial planner. If you are willing to learn and keep emotions out of your financial decisions, then you can do this yourself. I would bet most of you who posted fall in this category. I use to work at the Motley Fool years back because I wanted to help folks learn how to manage their finances without the help of Wall Street. What I found is so many people don’t have the time or the inclination to do this themselves. They want to outsource it to someone else. This is why I went into fee-only planning. We need more fee-only folks because the vast majority of planners are nothing more than salespeople. They spend the entire day trolling for folks to buy an annuity or life insurance policy. I do want to address a point I read about fee-only being too expensive. Many people say this because they have to write a check for hourly services or they receive a quarterly invoice from their fee-only advisor showing them exactly what they paid. The truth is it is cheaper than commission planners. Commission planners get between 5-10% of your investments when they sell a product (depending on the product sold). While you don’t write a check for this, the product company recoups this commission through higher fees. So you do pay these commission planners. It just isn’t transparent.

I also agree that the CFP is becoming more and more worthless as the salespeople achieve this mark. It is still the marquee designation in the field (which is why there are more CFPs than CIMAs). I always say you should look at the CFP as the de minimis qualification. If your advisor is not willing to put in the time to get the CFP, then you need to look elsewhere. But, if they have the CFP, that is just the first step in your selection process.

After that you need to ask if the person is a fiduciary in all their dealings with you. This means they have a legal obligation to put your interests first, above all others, including their own. And, you must ask if they do it in all their dealings with you. Some firms will take the fiduciary obligation as they build your plan, but when it comes to implementing your plan (meaning sell product) they switch hats and are held to the less stringent “suitability” clause. After that, you need to understand how they are compensated and how much. I wouldn’t use commission folks. Certainly, good commission planners exist, but by avoiding commission salespeople you are removing tghe largest conflict of interest. Beware of fee-based advisors as they still generate a large percentage of their revenue from commissions. They should also be called commission-based. Finally, make sure you trust the person.

On another note, I agree with azphx1972 that disability insurance is needed. Again, I never make a dime on implementing a policy for a client so I say this because I believe it. Your ability to earn an income is your largest financial asset – bigger than your house, IRA, or 401(k). If you lose that asset, your entire life will be turned upside down. At your age life insurance probably isn’t needed, but disability is. When I started my firm last year, money was EXTREMELY tight, but I still ante-d up the money for my disability policy.

I don’t quite understand people who say they don’t “need” to speak with a CFP or some other professional for their financial planning?

Do you have all the answers? Do you do your own semi-annual teeth cleanings too? If you have a substantial amount of money, you should be seeking professional advice.

If you have $265 in a Roth IRA and $100,000 in student loan debt, maybe you should find out some steps to get ahead…

There are very few examples and a very small percentage of people who are motivated enough to learn all their is to know about financial planning on the whole…

I would love to hear an example of someone making $XXX,XXX a year who pays $2000/year for cable, $40,000/year for the mortgage, $10,000/year in car expenses that is “too good” to speak to a professional on some ideas for their finances.

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